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Stocks close higher, Nasdaq clinches fifth day of gains after CPI report shows cooling

Truth is there have been buyers over the last few weeks, says Aureus's Karen Firestone

Stocks closed higher Thursday after December’s consumer price report showed inflation cooled for the month, raising hopes the Federal Reserve can once again slow interest rate hikes.

The Dow Jones Industrial Average gained 216.96 points, or 0.64%, to close at 34,189.97. The S&P 500 added 0.34%, to end at 3,983.17.

The Nasdaq Composite closed up 0.64% at 11,001.10, marking a five-day winning streak. That’s the first rally of that length the technology-heavy index has seen since July.

The Nasdaq is on pace for the biggest weekly increase of the three indexes, gaining 4.1% so far as investors picked up beaten-down growth stocks ahead of the CPI report. The S&P 500 and Dow are also poised for weekly advances of roughly 2.3% and 1.7%, respectively.

December’s CPI report showed a 0.1% dip in prices from November, but prices were still 6.5% higher than the prior year. That’s in line with what economists polled by Dow Jones expected. In November, the report showed a 0.1% monthly gain and an annual pace of 7.1%.

The CPI excluding food and energy prices was also in line with expectations, showing a month-over-month gain of 0.3%. The so-called “core” index was 5.7% higher in December than a year ago.

“I think the markets are pleased, but they don’t seem to be overly excited,” said Sandi Bragar, chief client officer at Aspiriant, of the reaction to the CPI report. “Any news in the right direction can make the markets happy these days.”

Stocks have rallied in recent sessions as investors bet the CPI report would confirm a weakening inflation trend. Investors in recent months have watched for data signaling cooling inflation in hopes it would give the Fed justification for further slowing interest rate hikes.

Boston Fed President Susan Collins said in an interview with the New York Times Wednesday that she’s leaning toward a smaller, quarter-percentage-point rate hike at the next meeting. On Friday, investors will parse remarks scheduled to be given by Collins and two other senior Fed officials.

Big banks including JPMorgan, Bank of America, Citigroup and Wells Fargo are set to report quarterly earnings Friday. Delta Air Lines is also slated to report.

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